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What Is Innocent Spouse Relief?

Under the United States tax code, a spouse is allowed to seek relief from tax, interest and penalties resulting from underpayment of tax by the other spouse on a joint tax return. These errors generally involve unreported income or an inflated deduction.

In order to be eligible for this form of relief, you will need to meet the following criteria:

  • Must have a filed joint return that has an understatement of tax due to an erroneous item of your spouse or former spouse.
  • You had no actual knowledge or reason to know of the error made by your spouse or former spouse at the time you signed the return.
  • You and your spouse or former spouse have not transferred property to one another as part of a fraudulent scheme.
  • After the IRS has reviewed your application, they must agree that it would be unfair not to relieve you of the tax in question.
  • Generally, you have to apply for relief within two years of the IRS initiating collection.

What Is Considered an Erroneous Item?

  • Unreported Income: Any gross income item received by your spouse or former spouse that they did not report on the joint tax return.
  • Incorrect Deduction, Credit, or Basis: Any improper deduction, credit, or property basis claimed by your spouse or former spouse.

You might also be eligible for partial relief if you had no knowledge or reason to know that only a portion of your joint taxes contained an erroneous item.

The IRS will consider the following things to determine if you should be held responsible for underpaying taxes:

  • Whether you received a significant benefit, either directly or indirectly, from the understatement.
  • Whether your spouse or former spouse deserted you.
  • Whether you and your spouse have been divorced or separated.
  • Whether you received a benefit on the return from the understatement.

At Eagleton, Eagleton & Harrison, Inc., we are committed to helping clients solve their IRS problems. If you have more questions about innocent spouse relief, call (918) 584-0462 to schedule a consultation with our attorney.

Additional Reading - What You Need to Know about the IRS Fresh Start Program